Report: Google Wants Spotify Again (Updated)

A news report making the rounds claims Google is in talks to make some sort of deal with the Spotify freemium music service, in advance of its putative launch in the United States, according to “a source with knowledge of the talks,” which have been ongoing for weeks now according to CNET. (Update: Spotify denied that report.)

Such a deal would make sense from Google’s standpoint. By combining Spotify’s P2P streaming service with the Simplify music locker service it acquired last year, Google could allow users to store music in the cloud — right alongside their Gmail, Google Docs, Google Talk voicemail messages, and Picasa photos — while offering them the chance to stream millions of songs for a monthly fee, courtesy of Spotify, and claiming bigger employee bonuses this year (more on that below).

However, this isn’t the first time we’ve heard this story. Another anonymous source (maybe even the same one), cited in a December report, said Google was trying to acquire Spotify or Rhapsody at some point last year, but that internal squabbling between warring factions within Google squelched the deal.

Whether or not Google acquires Spotify (which would likely cost at least $1 billion given current investments in the company), this news underscores Google’s wishes to launch a cloud music service to complement its other cloud-based offerings.

Images of the Android app that would accompany such a service have already leaked, but it lacks the social features to which Google intends to tie all employee bonuses this year. Purchasing Spotify and/or integrating it into this effort would give Google Music solid social features right out of the gate. YouTube executives told Evolver.fm that they’ve been watching the way European users share Spotify music on Facebook, so the deal would help Google in that regard. In addition Spotify already includes powerful collaborative playlist features.

In addition, Spotify’s API already allows music app developers (like the excellent Pitchify) to integrate the service’s into their applications, which would also help Googlers reap their social bonuses.

Another day, another anonymous source claiming Google wants to acquire Spotify. Yawn. On the other hand, this story may be rehashed, but if it really happens this time, music fans could be in for an exciting new listening option.

Update: The December report implied that Google was going to acquire Spotify; this latest one implies that it wants Spotify to power its new service, with or without an acquisition.

Another Update: Spotify issued a statement following CNET’s article denying that it is in talks with Google to power a Google music service.